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Marty Schwartz Talks Trading, Life at Amherst College

Trader and Pit Bull author, Marty Schwartz speaks at Amherst College and shares lessons on markets and life in a rare, hour-long video session (Hat Tip: Tischendorf Letter). 

You may also know Schwartz from his interview in Jack Schwager's Market Wizards, a chapter which I will revisit in a follow-up post. 



For now, let's absorb some of the wisdom and life lessons he imparts to the students at Amherst. Those of us who are students of trading and life may find a few pearls in the highlights below: 

Marty Schwartz begins his talk by relating some of his experiences as an Amherst student back in the 1960s (a technological "stone age" by comparison to today). He was decked early on with some pretty poor grades, but he fought to get back on track and completed his studies successfully. One recurring theme from the early portion of his talk is, "it didn't kill me so it made me stronger.".

Schwartz tells students, "I'm here to tell you that you can achieve anything you want, if you put the work in.". Dreams are accomplished with persistence and hard work. 

He began his Wall Street career as a securities analyst. There, he focused on company fundamentals and was paid a salary. However, he had a "penchant for gambling" and longed to work for himself as a speculator.

Credits his wife with giving him the confidence to stop being a loser and to become a winner. 

Realized at age 33 that he needed a methodology to succeed in the markets. He began using a technical approach to trading and he synthesized elements of other people's styles to form his own trading method. His career began to take off in the early '80s, especially with the launch of the S&P futures contract in 1982.

Marty says the S&P contract was "made for me, as I'm a market timer.". He looked for change in velocity in the market when making a trade, with the goal of selling at the top of a sine curve and buying the bottom of the curve. He equates these moves, or curves, in the markets to the changing ocean tides. Marty's approach was to find parallels to the markets in natural phenomena and "to try to replicate [these events] in the markets." 

"I like to compare markets to natural events... markets are living, breathing organisms. You have to adjust with them and continually change your methods." 

Investing is a lot different than trading, given the objectives and time horizons. Since Schwartz used leverage as a short-term trader, he realized that he needed to control his risk to prevent a blowup. "You need to use stops [a stop loss]... define an 'uncle point' to limit your risk. If you let large losses occur, it's much harder to climb up the mountain [or get back to even] and your emotional state is rattled.".

Schwartz went from being a fundamental analyst to trading with technical analysis, since he was more comfortable with this approach. "You have to look into your own personality and choose something [a trading style] that fits who you are, truthfully.". 

Money management is critical. "Why do most traders lose money? Because they'd rather lose money than admit they're wrong.". 

More from Marty Schwartz in the Q+A session and video above. You'll find more on trading and psychology in the related posts below. 

Check back with us next week for a follow-up post featuring highlights from Marty Schwartz's Market Wizards interview. See you then!

Related posts:

1. Why Traders Fail: Mark Minervini Interview - Finance Trends

2. SMB Capital at Indiana U: Aspiring Traders Take Note - Finance Trends

3. Trading Psychology - Martin Schwartz Quotes - Tischendorf  

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